Vendors Now Focusing on ERP Solutions for Small Businesses

Small businesses are the last market sector to migrate their business applications to enterprise resource planning (ERP) systems. Tier 1 companies, those with over more than one billion dollars in revenue, implemented ERP software years ago. The same goes for Tier 2, mid-sized companies with at least $200 million in revenue. Small businesses, however, are a large untapped market, and ERP solutions for that sector are now the focus of most vendors in the space.

As can be expected, ERP solutions for small businesses require less functionality and fewer features than the full-suite solutions marketed to larger businesses. Vendors have responded with programs that are less complex and easier to use. Those solutions, being less sophisticated, are also more affordable, a necessity for the smaller budgets of this market.

Tier One Companies Have Implemented ERP

The focus of software vendors shifted to small businesses about five years ago. Tier 1 had essentially been sold in the 1990s, in anticipation of the Y2K scare. Many of the implementations were not completed until early in the next decade, but the decisions were made and licenses had been purchased.

Tier 1 companies are normally slow to adopt new technology; however, with the impetus of Y2k driving faster decisions, companies pulled the trigger knowing that their older business systems would need replacement soon anyway and that ERP would provide competitive advantage. Once a few made the plunge, the rest jumped on board fearing they would be left behind. The ERP systems were necessary tools for large companies trying to pull value from their IT infrastructure. The single integrated systems helped streamline business operations and enable efficiency within the company.

Tier Three Market is Huge

The small business market is huge; there are more than one million companies in the US alone with between 20 and 100 employees. Industry analysts estimate that less than 25% of those companies have implemented ERP, but that’s changing rapidly. Small business ERP solutions are in demand with numerous vendors that were unknown just a few years ago now becoming dominant in the market. The biggest providers, such as SAP and Oracle, were a little slow out of the gate, which allowed the unknowns to get a toehold in the market, but now every major ERP vendor has a cost effective solution for small businesses.

Small Businesses Need Less Functionality

Like their larger competitors, small businesses looking to implement an ERP solution must first identify their needs and match those to the available solutions. However, since most small businesses do not have multiple divisions and international subsidiaries, many features of standard ERP systems do not apply. Instead, vendors are creating user friendly solutions that do not overwhelm the user with unnecessary or complex tools and functionality. Easy-to-use software that increases productivity is the primary requirement for small businesses ERP solutions.

Small Businesses Have Lower Budgets

The full-function ERP solutions used by Tier 1 companies are almost infinitely configurable, with the result that implementation time and costs are high. Obviously, that was not a business model that was going to gain much market share among smaller companies. Their lower budgets demand solutions that work out of the box; few small businesses can afford to configure and customize their ERP solutions.